Listing Agreements: What Are They, How Do They Work, And What Types Are There?

Real estate agents make selling a house quickly and for top dollar much more accessible than doing it yourself. When you use a real estate agent to sell your home, you must sign a listing agreement that provides the contract between you and the agent who agreed to sell the house.

Understanding the real estate listing agreement, how it works, and what you should negotiate is essential before signing a contract.

What Is A Listing Agreement?

A real estate listing agreement – also known as a seller’s agent agreement – is a contract between a property owner and a real estate broker. It permits the broker to sell the home on the seller’s terms, locating an appropriate buyer. The property owner pays the brokerage a commission for acting as the listing agent.

The listing agreement includes the terms of the deal, including the commission the seller will pay the agent. It also commits the seller to use the agent listed in the contract and no one else to sell the home; however, there are exclusions.

Types Of Listing Agreements

Real estate agents have three listing agreements, the most common of which is the exclusive right-to-sell agreement. But let’s go over some details of each type.

Open Listing Agreement

An open listing agreement is the least favorable agreement for real estate agents but gives sellers the most flexibility.

With an open listing agreement, sellers can use anyone to sell their home, not just the agent signing the agreement. In other words, it’s a non-exclusive contract allowing the seller to use any agent or sell the home themselves.

Most real estate agents prefer not to sign an open agreement, but sellers often like it when they are in a hurry to sell a home. In addition, not being tied down to one agent and having the chance to sell the home themselves may help sellers sell the house faster.

Some sellers choose this option when they want to save money on commissions too. They have the agent as a “backup” but do their best to try to sell the home themselves and save money.

Exclusive Agency Listing

With an exclusive agency listing, the seller commits to a single real estate agent to sell the property. However, like the open listing agreement, the seller has the option to sell the home themselves.

If the seller finds a buyer on their own, they don’t owe any real estate commission to the listing agent. However, unlike the open listing agreement, if a real estate agent sells the property, it can only be the listing agent who signed the agreement.

If the listing agent sells the property, the seller must pay the agent the agreed-upon commission. Like an open listing agreement, the exclusive agency listing is good for sellers who need the flexibility to sell their homes themselves, which is usually for those sellers in a hurry to sell.

Exclusive Right-To-Sell Listing

The exclusive right-to-sell listing is the most restrictive yet the most popular option. The exclusive right-to-sell gives the agent exclusive right to sell the home and any commissions earned. As a result, sellers can’t find buyers and avoid paying the commission, and no other agents can sell the property.

Listing agents with an exclusive right-to-sell listing give these homes the most attention, listing them on the MLS and using other marketing tactics to spread the word about the house for sale. Since real estate agents put the most effort in with exclusive right-to-sell listings, sellers are more likely to get top dollar for their homes and even sell their houses fast.

How A Real Estate Listing Agreement Works

The listing agreement provides all the details of the relationship between the seller and the listing agent. This includes the duties of each party and the details for the eventual sale of the house.

What Does A Listing Agreement Include?

The real estate listing agreement includes many sections. Here’s where you should focus when reviewing the contract to list and sell your home.

Including the percentage of the sales price in the agreement is essential, so the seller knows the cost when negotiating any offers to buy the home. Most sellers will pay around 6% commission on the sale. It’s also crucial that the listing agreement notes the exact percentage of the sales price and how the commission is split if a buyer’s agent is involved.

Are You Required To Sign A Listing Agreement?

A listing agreement is a legally binding agreement between the seller and real estate agent or REALTOR^®, so all parties must sign it.

Please note that if you buy a property, you don’t have to sign a listing agreement; it’s only for sellers.

What Conditions Can You Negotiate In A Listing Agreement?

Some aspects of a listing agreement are negotiable. Here are the terms you can discuss before signing an agreement.

What Happens To A Listing Agreement If Your House Doesn’t Sell?

If your house doesn’t sell, you have a few options, but first, you must wait until the listing agreement expires. Most contracts are for 6 months, but some are for shorter or longer durations.

Once the agreement expires, the house is taken off the market, and sellers can do what they want next. For example, you can try to sell the home yourself, sign another listing agreement with a different agency or renew your contract with your current agent.

How Do You Terminate A Listing Agreement?

Sellers can ask to terminate a listing agreement before the expiration date. If the agent isn’t having luck finding a buyer for the home or the service isn’t what you expected, you can ask for a release. If the agent doesn’t want to release the agreement, you can request to switch to a different agent within the same agency.

The Bottom Line

Selling a house with a real estate agent is often the best way to maximize your profits. Before you work with a listing agent, make sure you read the listing agreement and understand the terms of the sale. Take the time to negotiate details that aren’t in line with what you wanted and enjoy having a professional sell your home.

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